Sunday, 11 March 2012

Double Benefit - Tax Saving and High Returns

Stuart Mile
It’s Time to Save Tax. Every organization, be it Insurance company, banks, Infrastructure bonds, Mutual Funds are trying to showcase their product.

I got to see this Ad from SBI Tax Saving Deposits in News Paper. It’s a nice catchy ad that has Orange and Apple hanging to little branch. Further it reads “DOUBLE BENEFIT” - Tax Saving + High Returns.
The Prominent part of the Ad is Returns: 18.55 % p.a for Senior Citizen and 17.77%. p.a for Others.

Details of SBI Tax Saving FD.
SR
Particulars
Senior Citizen
Others
A
Investment Amount
10000
10000
B
Immediate Tax Saving *
3090
3090
C
Effective Investment(A-B)
6910
6910
D
Maturity Amount of original Investment
16187
15797
E
Total Pre Tax Benefit (D-C)
9277
8887
F
Rate of Interest
9.75%
9.25%
G
Effective Annual Yield(5 Years)
18.55%
17.77%

Tabulated details: Source -SBI Advertisement.
To be honest, I am great fan SBI bank. According to me it is one of the best banks. For now, let me keep my emotions aside and get into business. Let us see how if there are any other banks that can give better returns for Tax Saving FD’s.

On similar Lines, find details for Dhanalakshmi Bank Tax Saving FD.
SR
Particulars
Senior Citizen
Others
A
Investment Amount
10000
10000
B
Immediate Tax Saving *
3090
3090
C
Effective Investment(A-B)
6910
6910
D
Maturity Amount of original Investment
16872
16466
E
Total Pre Tax Benefit (D-C)
9962
9556
F
Rate of Interest
10.60%
10.10%
G
Effective Annual Yield(5 Years)
19.55%
18.97%

Conclusion: Chart clearly show that returns Dhanalakshmi Bank Tax Saving FD is better than SBI Tax Saving FD.
Note :
Dhanalakshmi Bank is offering Highest Rate of Interest for Tax Saving FD's
Which Bank would you go for?

8 comments:

roshan said...

Good comparison. I invested in SBI.

WealthUCreate said...

Roshan,
SBI is good Bank. No doubt about it. Dhanalakshmi bank is offering better interest rates.

Madbull-Ram said...

Thanks for it. Was about to invest moms money in SBI, will go for Dhanalakshmi now

WealthUCreate said...

Thats the way to Go Ram... Its all about getting better returns. Dhanalakshmi bank = Tax Saving + Highest Returns. :)

Amit said...

But this is pre tax return. The interest you get is taxable in case of above deposits. Since you have assumed tax bracket of 30%, your post tax yield would come to 14.15% (from 18.55%) for senior citizens and for others it would be 13.7% (from 17.77%)in case of SBI.

WealthUCreate said...

You are Right Amit. It is Pre-Tax. Only for people in low tax brackets, Tax Saving FD will provide attractive returns. The article intends to convey there another Tax Saving FD that is better than SBI.

vassuk said...

It has 5 years locking period. Best is to go for Tax savings mutual funds through SIP. This has locking period of 3 years and gives good returns.

WealthUCreate said...

If i was you, i would have done the same thing that you have written in your comments. The article intends to compare SBI tax FD with another Tax Saving FD offered by another bank.
The idea is to provide details of SBI Tax saving FD.

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